Just a few hours after the Fed, the Bank of Japan (BoJ) also announced its last monetary policy decision for this year, leaving its key interest rate unchanged at 0.25%. In the wake of the hawkish interest rate cut in the US and the unchanged rate in Japan, the Japanese Yen (JPY) therefore weakened only slightly against the US Dollar (USD) this morning, rising to over USD/JPY 155, Commerzbank’s FX analyst Volkmar Baur notes.

BoJ interest rates are set to continue rising

“In view of the comments made in recent weeks, an increase had become very unlikely, which had already had an effect on USD/JPY. In the wake of the hawkish interest rate cut in the US and the unchanged rate in Japan, the JPY therefore weakened only slightly against the USD this morning, rising to over USD/JPY 155.”

“BoJ also published a 200+ page review of Japanese monetary policy over the last 25 years. Based on the summary on the first pages, it contains no particular surprises. However, one sentence does stand out. It states that it would be desirable to conduct monetary policy in such a way that the zero lower bound would not be reached.”

“We therefore continue to assume that there is a willingness for further interest rate hikes and expect a move in January. Subsequently, however, we continue to assume that the economic environment will hardly allow more than one move and that it will therefore be a one and done. A temporary yen strength at the beginning of the new year is therefore quite likely.”